Wage garnishment is often one of the most pressing concerns for our potential clients in Maple Grove, Minnesota. They want to know if creditors can garnish their wages, and if so, when it will happen and how much they can take. Unfortunately, under Minnesota state law, creditors can garnish your wages because creditors have the right to seize any available non-exempt property, and that includes a portion of your wages. But there are things you can do to prevent or stop wage garnishments, and we will discuss the collection process and how you can stop it below.
Why can your creditors sue you?
When you apply for a credit card, or any other form of credit, you are entering into a contractual agreement with the lender whereby you promise to repay the lender for the credit extended. When you fail to make the payments as agreed upon, the lender then has the right to pursue you for breach of contract. Typically, the creditors begin this process by sending demand letters for the past due balance. After a period of time, they usually transfer the debt to a collection agency that continues the debt collection by calling or sending demand letters. The debt may be sold one or more times before finally landing with a law firm specializing in debt collection. When the debt reaches a law firm, you will receive a letter allowing thirty days to challenge the validity of the debt.
If you do not provide a basis to challenge the claim, and there usually is not one, the creditor will file a complaint in state court alleging that a breach of contract has occurred and seeking the amount owed plus interest, and possibly attorney's fees. You will receive a summons to submit an answer to the complaint, but there is rarely a reason to submit an answer. The result of this process is usually that the judge enters a default judgment in favor of the creditor, at which time the creditor may begin the garnishment process.
What happens after the judgment?
After entry of the judgment, the creditor has the right to demand information about your employment, property, and bank accounts and will typically send a Demand for Disclosure. You have a duty to fill out the request for disclosure that asks for information about you, and failure to do so could lead to further court action.
Once you have completed and returned the Demand for Disclosure, the creditor will have either your employment information or bank information it needs to begin collecting on the judgment. The creditor can either garnish your wages or levy on your bank account, or other non-exempt assets. The attorney representing the creditor must send you notice that this is going to take place and an exemption form where you can indicate if you are exempt from garnishment activity.
The creditor may withhold an amount totaling no more than 25% of an individual's wages from each check, with some exceptions (i.e. child support, tax debt). We are frequently asked if more than one creditor can garnish your wages at any given time. Fortunately, the answer is no. In other words, there cannot be a scenario where multiple creditors can all take 25%. However, each creditor is only allowed to garnish for a certain amount of time, then must take a break in case there are other creditors waiting in line. If not, the creditor can resume garnishment. This process can repeat until the creditor is paid in full. Depending on how much you owe and how much you make, the garnishment could last a short period of time, or a very, very long period of time.
How can you prevent or stop a garnishment?
This is by far one of the most frequently asked questions by our potential clients, and thankfully, it is something that we can help with. There are a few different ways to prevent a garnishment, but only one of them will also get rid of the debt. The first way, and the most effective way, is by filing a bankruptcy, which will stop the garnishment (or lawsuit) immediately, and will also ultimately get rid of the debt. At Kain & Scott our goal is always to help you in the most efficient and effective way possible, so if you are under threat of garnishment, we will work vigilantly to get your case filed as quickly as possible—including offering affordable ways to get your bankruptcy filed quickly. It is always a good idea to act as quickly as possible, because with a bankruptcy filing, we may be able to help you get your garnished wages back, depending on when the garnishment occurred and how much was taken.
If a bankruptcy is not an option based on your circumstances, another way to prevent a garnishment is to set up a payment plan with the creditor if you are able and if the creditor is willing. Sometimes potential clients assume that the creditor would not be willing, but there are reasons that it may be more beneficial to the creditor to take voluntary payments, so taking the time to reach out may result in preventing the unwanted garnishment.
A second way that garnishment may be prevented is if your income is exempt from collection. Certain types of income, such as social security income and unemployment compensation, cannot be legally garnished by creditors. Additionally, if you have received certain types of government assistance, energy or food assistance, for example, your wages may also be exempt from garnishment.
In any case, it is always a great idea to be proactive and fill out the Garnishment Exemption Form that should be provided by the law firm attempting to garnish your wages. If properly filled out and returned, the form should prevent the creditor from garnishing your wages or levying on your property.
If any of the above information sounds familiar, or if you are currently under a garnishment or are concerned that a wage garnishment may be quickly approaching, please contact Kain & Scott immediately to set up a free consultation because we can help, and we want to help you get rid of your debt and get your life back.